Nepal has a long history of returning public forests to local people as part of its community
forestry programme. In principle the community forestry programme is designed to address
both environmental quality and poverty alleviation. However, concern has been expressed that
forest policies emphasise environmental conservation, and that this has a detrimental impact on
the use of community forests in rural Nepal where households require access to public forest
products to sustain livelihoods. To study the effect of government policies on forest use, an
economic model of a typical small community of economically heterogeneous households in
Nepal was developed. The model incorporates a link between private agriculture and public
forest resources, and uses this link to assess the socioeconomic impacts of forest policies on the
use of public forests. Socioeconomic impacts were measured in terms of household income,
employment and income inequality. The results show that some forest policies have a negative
economic impact, and the impacts are more serious than those reported by other studies. This
study shows that existing forest policies reduce household income and employment, and widen
income inequalities within communities, compared to alternative policies. Certain forest
policies even constrain the poorest households’ ability to meet survival needs. The findings
indicate that the socioeconomic impacts of public forest policies may be underestimated in
developing countries unless household economic heterogeneity and forestry’s contribution to
production are accounted for. The study also demonstrates that alternative policies for managing
common property resources would reduce income inequalities in rural Nepalese communities
and lift incomes and employment to a level where even the poorest households could meet their
basic needs.